United States. Congress. House. Committee on Small.

The abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 online

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Online LibraryUnited States. Congress. House. Committee on SmallThe abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 → online text (page 20 of 20)
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private placement.

6. Whether the requirement of attracting equity
capital existed prior to our November, 1993 letter to SBA
doesn't negate the adverse effect premature Section 8(a)
termination would have had on I-NET. I-NET was trying to
attract equity as discussed above. Securing private
placements are fairly exacting processes. Bankers,
investment bankers and other consultants are often involved
and the process is time consuming. For a minority woman
owned business with no prior experience this is especially
true. If SBA had prematurely terminated Program
participation during that time, it would have had an adverse
affect on our ability to attract such equity capital.

7. Question /7, again, suggests that securing a
successful private placement is a quick and easy process.
Let me assure you, that is not the case. The sale of a
minority interest in a minority woman-owned government
contractor in a highly competitive industry takes time. As
correspondence we provided your staff indicates, during 1993
I-NET made numerous presentations to many potential investors
but was unable to secure a private placement infusion of
equity in 1993. As a result and as is consistent with
banking procedures, NationsBank requested additional fees and
personal guarantees. As the Committee is aware, after
exhaustive efforts, I-NET was finally able to obtain an
equity investment in 1994. It is neither surprising nor
unusual that it took I-NET almost two years to complete
successfully the private placement process.



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8. SBA's 1992 Section 8(a) regulations provided
that a firm with a proposed 1994 graduation date (as was the
case with I-NET) would, in 1992, be in year 3 of its
transitional stage. The 1992 regulations further provide
that in year 3 of an 8(a) firm's transitional stage, non-8 (a)
business activity targets should be 35-45%. Therefore I-
NET's position, that it's non-8(a) sales in '92 were 35.73%,
was regulatorily compliant. It is time consuming to go back
to our 1992 8(a) contract list to see what option years then
remained per contract. The vast majority of all then-extant
'92 8(a) contracts (and options) have expired. We are,
however, undertaking this task and will provide the
documentation to you as soon as completed.

9. We do not believe I-NET was overly reliant on
the 8(a) Program. Today, two years after voluntary
withdrawal from the 8(a) Program, we are a successful
commercial competitor amongst established network-based
computer services/telecommunications companies such as
Computer Services Corporation and EDS. Well over 70% of our
business is work we won competitively. We believe this
evidences the type of success that the Section 8(a) Program
Office, SBA, and hopefully, your Committee would want to see.

We appreciate the opportunity to respond to your
additional questions on this matter.

Sincerely,



I //'
Daniel A. Masur
Vice President and
General Counsel

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Online LibraryUnited States. Congress. House. Committee on SmallThe abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 → online text (page 20 of 20)